What is a 90% mortgage?
A 90% loan to value (LTV) mortgage allows you to buy a home with just a 10% deposit. With 90% LTV mortgages, you need a deposit that’s 10% of the property’s value (or 10% equity in a current property if you’re looking to remortgage). The term ‘loan to value’ describes the size of the mortgage in relation to the property value.
For example, if you’re buying a property costing £250,000, you’d put down a deposit of £25,000 (10% of £250,000). That would mean you’d take out a 90% mortgage for the remaining £225,000 (90% of £250,000).
However, it’s important to remember that 90% loan to value mortgage rates are usually higher than other types of mortgages where you’re putting a larger deposit down. That’s because lenders are taking on a higher level of risk. Having said that, 90% mortgages for first time buyers do tend to be cheaper than 95% deals.
The other downside of 90% mortgages to bear in mind is that, if property prices fall, you could end up owing more than the property is worth - known as ‘negative equity’.
This type of mortgage is similar to a 95% mortgage - that is, where you put down just 5% deposit and take out a mortgage for 95% of the value of your home.
Why choose a 90% mortgage?
- Smaller deposit needed
- Only need to save 10% of the property’s value
- Faster way to buy
- Ideal for people keen to get on the property ladder quickly
- More lenders offering deals
There are a few things to watch out for too:
- Higher interest rates – Lenders charge more to cover the risk of low deposits
- Stricter affordability checks – You’ll need to show you can manage repayments, even if rates rise
- Less equity to start with – Means it can take longer to build up equity in your home
How 90% mortgages compare to other LTV deals
90% vs 95% mortgages
90% mortgages usually offer lower interest rates and better choice than 95% deals
90% vs 85% mortgages
85% mortgages need a bigger deposit but often come with lower monthly payments
90% vs 75% or lower LTVs
The lower the LTV, the cheaper the interest rate, but you’ll need more upfront cash
Who can get a 90% mortgage?
Lenders will look at several things to decide if they’ll offer you a 90% mortgage:
Income
Most lenders offer 4 to 4.5 times your annual income (sometimes more if your finances are strong)
Deposit
You’ll need at least 10% of the property value
Outgoings
Including debts, childcare costs and other financial commitments
Credit history
Clean credit reports will give you more options and better rates
Employment status
Most deals are available to employed and self-employed buyers
You’ll also need to show your lender recent bank statements, payslips (or tax returns if self-employed), and details of your deposit source.
90% mortgage repayments
Your repayments will depend on the size of your mortgage, the interest rate, and the term of the loan. Because you’re borrowing more compared to someone with a bigger deposit, your monthly payments might be a bit higher.
Repayments will normally include both capital and interest unless you’ve chosen an interest-only mortgage (which are harder to qualify for with high LTVs).
If your deal allows, you might be able to make overpayments to reduce your loan faster and pay less interest overall. Some lenders allow 10% overpayments per year without any fees.
Finding the best 90% LTV mortgage deals
If you want peace of mind that your mortgage payments won’t change if interest rates rise, you might want to consider locking into a fixed rate 90% mortgage deal. Alternatively, you might prefer a variable rate 90% deal if you believe that interest rates are likely to stay low for longer.
Whichever type you choose, we’ll give you our expert advice and search across the market to find the best 90% mortgage rates for you. When you’re ready to submit your application online or over the phone, we’ll search thousands of 90% mortgage interest rates to find the best deal for you.
Apply for a 90% mortgage with L&C
If you think a 90% mortgage could be right for you, we’re here to help. Use our best buy tables to compare the top 90% mortgage deals available right now.
You can apply online or speak to one of our expert advisers. We’ll walk you through the whole process, from finding a lender to submitting your application and getting your offer.
L&C has been fee-free since 1999, and we’re here to help you get the keys to your new home.
